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How to Trade Stock Options

By Edited Jul 23, 2015 0 0

Are you looking for an opportunity to drastically increase your rate of return in the stock market? If you can handle some additional risks, then trading stock options may be an opportunity for you. If you can develop a sound options trading strategy that limits your risks while maximizing your returns, then you have set yourself up for some serious gains.

So what opportunities are there to learn how to trade stock options that can put you in a position to profit? Investing in stock options with very little knowledge or education can be a short lived experience if you don't watch out. There are plenty of experienced investors who will leverage their skill set and quickly take your money.

If you are interested in learning more about how to trade stock options, check out the steps below to get you started.

Things You Will Need

online discount broker
internet access

Step 1

Open up an account with an online discount broker who offers stock option trading. Most online brokers offer this service today, but you want to make sure before signing up. Is is also a good idea to shop around for the best commission prices in combination with other services and tools.

Step 2

Educate yourself on some of the widely used options trading strategies that other experienced traders are having success with. Some of these strategies may include selling covered calls, buying and selling deep in the money calls, or trading in the money puts. These are just a few of the basic strategies used today and are a good starting point to learn from.

Step 3

Practice trading stock options by using a simulating tool or by learning from a mentor. There are plenty of simulated tools (check with your online broker) that can help you learn the smaller details of buying and selling stock options. This is a great way to learn and can be much less stressful and losing your real money.

Step 4

Research potential stock option trades by running standard stock searches based on your strategy. For example, if you are interested in buying and selling deep in the money calls, then you want to look for high quality stocks that you wouldn't mind owning. On the other hand, if you plan to buy and sell deep in the money puts, then you want to look for stocks that are overpriced and are expected to decrease in value.

Step 5

Place trades to buy and or sell call and put options using your online discount broker. By this time you should have completed your research and ran through some simulated trades. When you feel comfortable, it is time to start trading. If you are new to trading options, then you may want to start out slow and manage your trade very closely to fully understand this process. Array

Tips & Warnings

Don't rely on others opinions to make your investment decisions. Use their advice to help guide a decision, but always make sure it is your choice.


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